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on Informal and Underground Economics |
| By: | Niels Johannesen; Lauge Larsen; Nadine Riedel |
| Abstract: | In a coordinated effort to curb tax evasion, governments systematically exchange information about bank accounts with foreign owners. We study the compliance effects of the policy in the context of South Africa using information reports on 1 million foreign bank accounts linked to income and audit data. We find that self-reported foreign income increased sharply and persistently at the onset of information exchange, but remained much below the true foreign income implied by the information reports. We explain the partial compliance response by showing that, contrary to standard theory of third-party reporting, the detection risk associated with non-compliance was modest. |
| Keywords: | tax compliance, tax evasion, tax enforcement, international taxation, information exchange |
| JEL: | H26 H31 H87 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12747 |
| By: | Amin, Mohammad; Rodriguez Cuniolo, Eugenia Aurora |
| Abstract: | This paper investigates the impact of informal competition—defined as competition faced by formal firms from informal enterprises—on the firm-provided worker training among formal manufacturing small and medium-sized enterprises. Using a representative dataset of small and medium-sized manufacturing firms in 23 Sub-Saharan African countries, a sizable negative impact is found. A one-standard-deviation increase in informal competition reduces the probability that a firm offers training to its workers by 8.7 to 12.9 percentage points, relative to the sample mean of firms that offer training of approximately 25 percent. Comparable declines are observed in the share of workers receiving training. To address potential endogeneity, the paper employs several complementary strategies. First, an instrumental-variables strategy leverages variation in the number of children aged 0–4 and 5–9 years per working-age woman to generate exogenous shifts in informal competition. Second, heterogeneity is examined through tests derived from the “legalist” view of informality, which predicts bigger adverse effects of informal competition in environments characterized by a weaker rule of law and more stringent business regulations. Third, information about firms in other world regions is used to construct out-of-sample predictions of informal competition at the sector level. The findings sugge st that informal competition is a substantial constraint on the training investments of formal firms, underscoring the need for policy responses that mitigate its adverse consequences. |
| Date: | 2026–06–29 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11420 |
| By: | Edoardo Di Porto (Sapienza University of Rome, CSEF, University of Naples “Federico II”, UCFS, Uppsala University, and CESifo); Pietro Garibaldi (Collegio Carlo Alberto, University of Torino, CEPR, and IZA); Giovanni Mastrobuoni (Collegio Carlo Alberto, University of Torino, CEPR, IZA, and RFBerlin); Paolo Naticchioni (Roma Tre University and IZA) |
| Abstract: | Work arrangements with no guaranteed working hours, which include casual work, are often promoted as a means to regularise informal labour. Utilising unique Italian administrative data that links employer-employee records, daily voucher usage by firms, and randomly timed labour inspections (2014-2017), we demonstrate that this type of Flexible Work Arrangements (FWA) can also hinder enforcement and increase undeclared work. We document that, upon inspection, some firms validate undeclared work with FWAs on the spot, raising the probability of FWA usage by 0.88 percentage points (18%) on average, with the largest increases occurring on the day of and the day after the inspection. A simple partial-equilibrium labour-demand model with heterogeneous tax morale rationalises these “on-the-spot” validations as an enforcement-avoidance margin. The post-inspection increase vanishes when firms are required to pre-notify the tax authority of their use of FWAs. Moreover, when FWAs are completely abolished, presumptive misusers substitute FWAs with temporary contracts. |
| Keywords: | informality, labour vouchers, flexible work arrangements, occasional work, zero-hour contracts. |
| JEL: | J23 H26 |
| Date: | 2026–07–04 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:786 |
| By: | Bamieh, Omar; Dolado, Juan J; Janez, Alvaro; Wellschmied, Felix |
| Abstract: | Chile’s 2022 Platform Work Law mandates firms to monitor their subcontractors’ formality and establishes maximum working hours, minimum pay, and the right to collective bargaining among independent contractors. Chile further stands out worldwide for providing a comprehensive and nationally representative dataset for platform work that allows us to track workers’ labor market outcomes over 2020-2024. By means of DiD and event study regressions, we find that this reform induced an 8-percentage-point shift from the share of informal to formal subcontractors with no change in the share of employees. Moreover, there were no significant changes in collective bargaining, compliance with minimum pay and maximum hours, or wage differentials between employees and subcontractors. The changes in hiring practices and wages are consistent with a structural labor market model where firms hire employees and formal and informal subcontractors. The calibrated model also shows that the reform reduced platforms’ profits, while strictly enforcing hours regulations would lead to very small welfare losses. |
| Keywords: | Platforms; Employees |
| JEL: | J21 J60 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21541 |
| By: | Julien Albertini (Université Lumière Lyon 2, Université Jean-Monnet Saint-Etienne, emlyon business school, GATE, 69007, Lyon, France); Tony Berthonneau (Le Mans Université, GAINS-TEPP; Université Lumière Lyon 2, Université Jean-Monnet Saint-Etienne, emlyon business school, GATE, 69007, Lyon, France); Anthony Terriau (Le Mans Université, GAINS-TEPP) |
| Abstract: | We study the interplay between informality, health, and education in South Africa. Using data from the National Income Dynamics Study, we document large disparities in health and labor market outcomes over the life cycle. We develop and estimate a life-cycle search-and-matching model with endogenous education and a dual labor market. We show that informal employment and poor health reinforce each other, generating a persistent poverty and poor-health trap. Policy experiments show that the optimal reform combines tertiary education subsidies, a broader tax base, and a lower average tax burden on earnings, increasing employment, welfare, and health while preserving fiscal balance. |
| Keywords: | Informality, Health, Education, Human Capital, Search and Matching |
| JEL: | I14 J24 J46 J48 J64 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:gat:wpaper:2607 |
| By: | Maike Roth (Johannes Gutenberg University, Germany); Prof. Dr. Friedrich Schneider (Johannes Kepler University, Germany) |
| Abstract: | Using a survey for Germany, we evaluate access to illicit tobacco products and the propensity to engage in illicit purchasing. By separating realized opportunities from stated openness toward future illicit purchases, the analysis provides insight into the behavioral foundations of illicit tobacco markets. This is relevant for current policy. If illicit demand responds not only to prices but also to attitudes toward taxation and regulation, tax increases may have heterogeneous effects across groups. Overall, the findings suggest that effective tobacco tax policy should not rely solely on price incentives, as perceived restrictions of freedom may increase openness to illicit markets. |
| Keywords: | Tobacco tax noncompliance, conducted survey, illicit tobacco products and markets, price incentive, regulation |
| JEL: | K42 M38 H26 O17 |
| Date: | 2026–06–19 |
| URL: | https://d.repec.org/n?u=RePEc:jgu:wpaper:2606 |
| By: | Dominika Langenmayr; David Streich |
| Abstract: | We provide evidence that individuals use cryptocurrencies to channel funds into and out of tax havens. Exploiting the Panama Papers (2016) and Paradise Papers (2017) leaks as shocks to offshore detection risk, we compare prices of cryptocurrency–fiat pairs involving Singapore and Hong Kong dollars — the two haven currencies with sufficient trading data — to those involving non-haven currencies on the same exchanges. Prices denominated in haven currencies rise by approximately 10% relative to non-haven currencies following the leaks, consistent with increased demand for crypto originating in tax havens. Effects are concentrated on smaller, less liquid exchanges where arbitrage is constrained, and dissipate within two months, consistent with market efficiency and limits-to-arbitrage theory. These findings suggest cryptocurrencies serve as an alternative channel for capital flows that bypass conventional anti-money-laundering infrastructure. |
| Keywords: | tax havens, illicit financial flows, cryptocurrencies |
| JEL: | H26 G12 G14 F31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12740 |
| By: | Bibler, Andrew; Gao, Yuting; Grigolon, Laura; Tremblay, Mark |
| Abstract: | Statutory tariff rates may overstate the tariffs actually paid due to evasion and avoidance. We develop a novel method to estimate tariff compliance and apply it to the 2018 trade war, when several countries imposed retaliatory tariffs on U.S. exports. Estimated compliance falls by 25 percentage points after tariff increases; a one percentage point tariff increase reduces compliance by 1 to 2 percentage points. Compliance is lower for intermediate goods, which often qualify for duty-free treatment, and for differentiated products, whose valuation is more difficult to verify. The decline accounted for approximately $3.5 billion in foregone tariff revenue in 2019. |
| Keywords: | Trade war |
| JEL: | F13 H20 H22 H26 L10 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21463 |
| By: | Fadi Daraghmeh; Sameh Hallaq |
| Abstract: | This study examines the state of decent work in the West Bank, focusing on the intersection of labor market conditions, gender disparities, and the fragility of legal enforcement. Using a mixed-methods approach that combines labor force surveys, qualitative interviews, and institutional analysis, we document substantial gaps in labor rights, social protection, and equitable employment opportunities, particularly for women and youth. The findings reveal that informal work, weak regulatory frameworks, and limited access to social protection undermine progress toward Sustainable Development Goal 8 of the United Nations 2030 Sustainable Development Agenda, which aims to promote sustained, inclusive, and productive employment. Policy recommendations emphasize the need for comprehensive legal reform, targeted skills development, and social protection expansion to enhance labor market inclusion and economic resilience in fragile contexts. |
| Keywords: | Decent work; West Bank; Youth; Women; creative industries |
| JEL: | J21 J38 O15 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1116 |
| By: | Koffi Zougbédé; Alban Mas Aparisi; Rebecca Gramiscelli-Hasparyk; Jill Bouscarat; Philipp Heinrigs |
| Abstract: | This paper provides new evidence on private sector perceptions on intra-regional food trade in West Africa, drawing on a survey of more than 3 200 food traders operating across 32 markets in eight countries. The dataset allows for a differentiated analysis by business size, gender, country and product specialisation. The findings reveal an extensive, economically significant, and market-driven sector, though it remains predominantly informal. While over 80% of traders are unregistered, the median trader has an average monthly turnover of USD 13 289 and employs five workers. Traders respond strongly to market signals, such as price differentials and demand patterns, and more than half (56%) trade with non-neighbouring countries. Overall, 62% of traders report a positive business outlook for the next five years, with variations across countries and food products. The main constraints identified extend beyond border procedures and include limited access to finance, insecurity, and inadequate transport and market infrastructure. This analysis points to a strong but under-leveraged market dynamic and underscores the need for better-adapted policies to unlock the potential of intra-regional food trade. |
| Keywords: | Africa, food systems, intra‑regional food trade, private sector, SMEs, trade, West Africa |
| JEL: | F13 J46 L26 Q17 R12 |
| Date: | 2026–07–06 |
| URL: | https://d.repec.org/n?u=RePEc:oec:swacaa:52-en |